Can Shopify Stock Make a Comeback After an Earnings Sell-Off?

Key Points

• Shopify stock has sold off after the company reported its quarterly earnings results, though the actual figures suggest the stock should move much higher.
• As uncertainty clears from trade tariffs, the double-digit financial growth in the company will justify its premium. 
• Wall Street analysts still see double-digit upside potential in the stock moving forward.

Trading around or near the time of a company’s quarterly earnings can be daunting, since volatility is usually near the top of the range during the days leading up to and right after the announcements are made. However, some swings take place during this short period, giving investors the rare opportunity to get behind a significant move, one that carries a favorable risk-to-reward setup to be taken advantage of.

That being said, there is one such opportunity in shares of Shopify Inc. NYSE: SHOP, especially now that the company is subject to scrutiny and uncertainty driven by President Trump's recent rollout of trade tariffs. These tariffs severely affected the business and its ability to continue dealing with Chinese items and their shipment in and out of the United States.

With all things considered, there is a real risk in this technology stock's future. However, one that pales in comparison to the increasing market share and earning potential it also carries as the global economy turns to e-commerce and more online businesses, especially in a world where consumer budgets are getting tighter. Governments and businesses keep inflation pressures at the top of their minds. Here are some reasons this sell-off might be short-lived.

What Is Really Behind This Sell-Off

Shopify's shares declined by just over 5.5% during the week of its quarterly earnings announcement, shaking out many confident traders and investors who had found optimism in the company’s future. Before digging deeper into where the opportunity is born, investors should understand what drove the stock lower in the first place.

The answer is that it wasn’t much more than just the future guidance, which was actually not too bad, as it did point to continued growth ahead for the company. However, markets may be calling for a pullback on guidance or an outright miss by the next quarter when the actual effect of tariffs hits the marketplace and Shopify’s consumer base.

However, the quarter's actual numbers were stellar, starting with what drives the first step of success at Shopify. On a gross merchandise value (GMV) basis, Shopify reported up to $74.7 billion, which was a net growth rate of up to 23% compared to the $60.8 billion reported for the same quarter last year.

All of this translated to a net revenue of up to $2.3 billion, also a significant growth rate of 27% over the past 12 months. Some might say that the bearish thesis, and the reason for the selloff, is that these growth rates do not yet reflect the tariff effects on the company’s business model and cost basis.

Nonetheless, investors can lean on Shopify's earning power to adequately respond to these added costs, which can be quantified through the reported free cash flow (operating cash flow minus capital expenditures) of up to $363 million, a significant jump compared to the $232 million generated last year.

With this in mind, it shouldn’t come as a surprise to see the market smile and celebrate as the stock allows everyone to get in at a seeming discount.

The Market’s Bullish Outlook on Shopify Stock

Even though shares of Shopify had a negative initial reaction to the earnings release, the broader market understands where the real value of the company lies after a stellar growth rate was reported across the board, which is higher. To understand this trend, investors need to dig deeper into the fabric of the market and how it expresses these views.

One way is through valuation multiples, where Shopify rightfully commands a premium over its peer group, starting with its price-to-earnings (P/E) ratio of 59.2x. This valuation is significantly above the computer sector’s average multiple of 43.4x today, but this premium doesn’t end there.

On a price-to-book (P/B) basis, Shopify’s valuation of 10.3x is also above the sector average of 6.4x. While some value investors might see this as overextended and expensive, seasoned professionals will remind them that the market is always willing to pay a premium for stocks that it believes can outperform in the near future.

Knowing that trade talks between the United States and China are moving in the right direction, with both parties willing to sit down for further talks on how to come out on amicable terms, the tailwinds that these bearish traders see in Shopify might not end up playing out at all, clearing the way for the stock to move higher.

But how much higher? Well, Wall Street analysts have an answer to that, too. As of May 2025, the consensus price target is set at $116 per share. This gives investors the sort of upside that is much needed in this uncertain environment.